Fifty Years Later–We Need Another Bretton Woods Conference

By Donella Meadows

–June 30, 1994–

Just weeks after D-Day, while the Allied armies were still battling their way toward Germany, a quieter event occurred that would shape the world as powerfully as the war in Europe.

On July 1, 1944, 730 delegates from 44 nations assembled at the Mount Washington Hotel in Bretton Woods, New Hampshire. They stayed three weeks. When they left they had laid the groundwork for the reconstruction of Europe, for a global money and trade system, and for the World Bank and the International Monetary Fund (IMF).

Fifty years later we can declare the first goal of Bretton Woods, the reconstruction of Europe, an unqualified success. The second goal, a system of fixed exchange rates backed by the solid American dollar, was abandoned in the 1970s. The dollar proved not so solid. But the trade that was the point of the exercise goes on at a pace that wouldn’t have been believed in the summer of 1944.

The third and fourth achievements of Bretton Woods, the World Bank and the IMF, evolved into powerful institutions still very much with us. They could be called successes too. They will celebrate themselves royally this year. But the celebrations will be marred by raucous dissent. In English the protest signs will read “Fifty Years is Enough!” In Spanish “Con 50 Anos, Basta!”

Both the celebrations and the protests are appropriate. The World Bank, having reconstructed Europe, turned its attention to constructing the Third World. It has loaned hundreds of billions of dollars for power plants, roads, and other installations deemed necessary to economic development. To the poorest nations it lends at low interest and provides technical experts along with the money.

The IMF is the lubricant of world trade. It lends U.S. currency, say, to Costa Rica, so that Costa Rica can buy our computers. Then Costa Rica sells us coffee and bananas and earns dollars to pay the loan back. Without the IMF, trade between every nation and every other nation would have to be balanced at all times — which would slow things down considerably.

Essential roles these Bretton Woods inventions play. But their critics are angry enough to pound on the governments that fund these institutions — especially our own — and demand cut-offs of the money. Their accusations center around bigness, arrogance, unaccountability, and narrowness of vision. The Bank and IMF keep a sharp eye on credit balances around the world, but lose sight of people and nature. They make loans in chunks of hundreds of millions of dollars, when development may be better served at a scale of hundreds of dollars. They impose their theories of development in spite of evidence that those theories are not valid.

For example, the Bank has been a major lender to India’s massive energy program, financing open-pit mines and coal-burning power plants that pollute an enormous area with acid drainage and smog. The project will soon be the single largest new source of greenhouse gas emissions in the world. It has displaced 140,000 people who were not compensated, who have no place to go, and who are not even served by the electricity the project generates.

The Bank has financed roads through the Amazon that usher in deforestation. Its projects log uplands that sends eroded silt downriver to clog dams. Only after furious opposition has it desisted from funding dams on the Narmada River in India that would have displaced a million people. Nonprofit organizations routinely follow the Bank around analyzing and publicizing the detrimental environmental and social impacts of its projects — something the Bank would do for itself, if it could look beyond money to the real physical and human aspects of development.

Over the fifty years of their existence the Bank and the IMF have had a succession of theories about how to make development happen. The latest of these is “structural adjustment.” That means, in a nutshell, dismantling government-funded social programs and removing all obstacles to the operation of private enterprise.

The World Bank provides loans more favorably to nations that undertake structural adjustment. The IMF is less gentle. When Costa Rica hasn’t exported enough coffee and bananas and its foreign exchange debt builds up, the IMF essentially steps in and takes over the government. In its wake education, health, and nutrition budgets are decimated. Crops and forest products are diverted from domestic needs to export. The balance of payments improves. The people and environment suffer.

A World Bank consultant, Robert J. Berg, recently pointed out rather loudly that structural adjustment programs were failing in Africa. The Bank replied even more loudly that 30 to 33 of those programs were in fact working. A year later the Bank admitted that no more than six African structural adjustments could be called successful. Says Berg: “When I asked a key Bank official to explain the difference between 30 to 33 successes reported last year and 6 claimed this year, he cavalierly replied: ‘Propaganda. We wanted to create a bandwagon effect.’ This bandwagon … was aimed at selling failed structural adjustment policies to Russia and her neighbors — with profound consequences.”

That’s not just arrogance and narrowness; it’s abuse of power. And it’s not working. In 1960 the ratio of income between the top 20 percent of the world’s people and the bottom 20 percent was 30 to 1. In 1989 it was 59 to 1. Despite some local successes, the overall work of the Bretton Woods institutions has produced a widening gap between the rich and the poor.

What is needed in this anniversary year is not self-congratulation, but another conference, of at least three weeks, bringing together the highest officials of the Bretton Woods institutions and their toughest critics. “Fifty Years is Enough!” may be too harsh a judgement. But after fifty years it’s high time to rethink, learn from successes and failures, and make the World Bank and the IMF the objects, not the enforcers, of some serious structural adjustment.

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The mission of the Donella Meadows Project is to preserve Donella (Dana) H. Meadows’s legacy as an inspiring leader, scholar, writer, and teacher; to manage the intellectual property rights related to Dana’s published work; to provide and maintain a comprehensive and easily accessible archive of her work online, including articles, columns, and letters; to develop new resources and programs that apply her ideas to current issues and make them available to an ever-larger network of students, practitioners, and leaders in social change. Read More

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